Partial Distribution

[JBones]

A client decided to be proactive and pay out terminated employees from a defined benefit plan. No one really knows exactly where the values that were paid out came from, but they sent out 10 checks to 10 vested terminees with no distribution paperwork in December 2010. It appears that all of the distributions made were far below the actual amounts that were due each participant. Now, I am trying to distribute the remaining amounts. None of the benefits approach 415 limits.

Is this the correct method to determine the remaining distributions:

Determine the equivalent monthly benefit of the lump sum distribution based on both plan rates and 417e rates. Take the lower of the 2 monthly benefits, subtract that from the total accrued monthly normal retirement benefit to deterimine the portion of AB not yet distributed and use that to determine the value of the optional forms of benefit yet to be paid.

Obviously there are issues with not obtaining spousal consent or providing the option to make a rollover and those are currently being addressed as well.

[Andy the Actuary]

As you mentioned, there are all sorts of violations, FIT withholding, spousal consent, relative values, 402(f) notification, amending the Plan for partial distribution. Yipes.

To comment on your question, however, your method seems algebraically appropriate, though there are other methods.

[JBones]

In this distribution, the participant has retained an attorney who is requesting that distribution paperwork be prepared and provided for the amount that was already distributed.

Can I prepare distribution forms illustrating the lump sum she received, and the relative values associated with that lump sum, provide that now so that she can waive her annuity benefit (luckily she wasn't married) and then provide additional distribution paperwork for the remainder of her payment?

[david rigby]

Yipes.

Seems like the best response to me.

Another view is that any solution is so open to problems, the sponsor should probably precede any action with advice from its ERISA counsel.

[JBones]

Yipes.

Seems like the best response to me.

Another view is that any solution is so open to problems, the sponsor should probably precede any action with advice from its ERISA counsel.

That is my concern too, but luckily I was able to convince the sponsor to obtain ERISA counsel yesterday, so at least I can have some confidence now in our solutions moving forward.